After two decades of betting on corporate mergers, one of Wall Street's best-known risk-arbitrage desks has fallen victim to its own deal.

Goldman Sachs Group Inc., which last year bought specialist firm Spear, Leeds & Kellogg LP for nearly $7 billion, is closing down the unit's risk-arbitrage operation, people familiar with the situation said. Although the shutdown is effective Nov. 30, the seven-person operation has stopped...